Offshoring Defined and Top 10 Benefits

Definition of Offshoring

Offshoring is defined as moving manufacturing or other business processes overseas versus having them operate domestically. 

This term is sometimes intermittently used with outsourcing, but there is a difference.

Outsourcing involves contracting some internal services to a third party company, which could be anything from manufacturing, assembly, marketing, accounting, freight management, etc.  Outsourcing does not necessarily mean the operation will be moved outside of the country.

Offshoring, however, is moving an operation to another company to re-locate elements of the business overseas, while the company remains domiciled domestically. 

Advantages to Offshoring 

• Reduction in Operating Costs
• Access to Much Larger Work Force
• Increased Flexibility
• Allow Domestic Resources to Focus in Other Areas of Greater Strength
• More Favorable Government & Regulatory Policies
• Tap into Global Talent
• Seize on Local Market Opportunities
• Speed to Market
• Round-the-Clock Shifts
• Cheaper Capital Equipment

However, there are some risks involved in moving part of the business internationally. 

• Unforeseen Costs
• Possibly Losing Control of Intellictual Property
• Language Barriers
• Loss of Oversight and Control
• Potential Slowdowns
• Integration Difficulties 
• Quality Checks

Offshoring is a very hot topic in the manufacturing industry today, which has sparked a debate about moving jobs back to the United States to boost the economy. 

It is important to consider enlisting the help of experts in the industry to best know the options that are out there internationally if considering offshoring.

Other articles of interest: 

• Nearshoring Defined & Top 10 Benefits in 100 Words
• IPI Freight Definition and Best Practices
• Definition and Benefits of a Foreign Trade Zone (FTZ)
• Harmonized Tariff Schedule (HTS) Defined
• The Comprehensive Guide to Managed Transportation Services